Accounting for Managers
Final Test Solutions
Course Introduction
Accounting for Managers is designed to equip future business leaders with a comprehensive understanding of accounting concepts and practices essential for effective decision-making. The course covers key topics such as financial statement analysis, budgeting, cost-volume-profit analysis, and performance evaluation.
Emphasizing the role of accounting in planning, controlling, and evaluating business operations, students will learn how to interpret financial data and apply accounting information to real-world management scenarios. By bridging the gap between accounting theory and managerial application, the course prepares students to communicate financial insights, assess organizational performance, and make informed strategic decisions.
Recommended Textbook
Accounting for Non Specialists 7th Australian Edition by Atrill McLaney
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Page 2
Chapter 1: Introduction to Accounting
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Sample Questions
Q1) Which of these groups is a user of financial information?
A)Managers.
B)Lenders.
C)Owners.
D)All of the above.
Answer: D
Q2) The statement concerning the key qualities of accounting information that is untrue is:
A)the qualities are frequently in conflict.
B)relevant information may help to predict future events or confirm past events.
C)relevant information often contains a degree of subjectivity.
D)None of the statements is untrue, i.e., all are true statements.
Answer: D
Q3) Which of these is not one of the key qualities of accounting information?
A)Timeliness.
B)Reliability.
C)Control.
D)Relevance.
Answer: C
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Page 3
Chapter 2: Measuring and Reporting Financial Position
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Sample Questions
Q1) Identify the current asset.
A)Fixtures and fittings.
B)Inventory.
C)Delivery vehicle.
D)Loan to L Hardie repayable in 2 years.
Answer: B
Q2) Which accounting convention has the effect that the employees will not appear as an asset on the entity's statement of financial position?
A)Money measurement convention.
B)Accounting period convention.
C)Stable monetary unit convention.
D)Entity convention.
Answer: A
Q3) The accounting convention that the objectivity principle provides support for is:
A)historic cost.
B)prudence (conservatism).
C)relevance.
D)accounting period.
Answer: A
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Page 4
Chapter 3: Measuring and Reporting Financial Performance
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Sample Questions
Q1) The method of inventory valuation that assumes earliest inventory acquired comprises the stock of inventory at the end of the period is the:
A)reducing-balance method.
B)FIFO method.
C)average cost method.
D)LIFO method.
Answer: D
Q2) Choose the statement that best describes the effects of the LIFO inventory valuation method compared to FIFO or average cost.
A)During periods of falling prices, LIFO gives the highest gross profit and the lowest closing inventory value.
B)During periods of rising prices, LIFO gives the highest gross profit and the lowest closing inventory value.
C)During periods of rising prices, LIFO gives the lowest gross profit and the lowest closing inventory value.
D)None of the above.
Answer: C
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Chapter 4: Introduction to Limited Companies
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Sample Questions
Q1) In what order do the following items appear in a company's statement of financial performance?
1. Tax expense
2. Revenue
3. Gross profit
4. Operating profit
5. Cost of sales
A)1, 2, 3, 5 & 4.
B)2, 3, 5, 1 & 4.
C)2, 5, 3, 1, & 4.
D)2, 5, 3, 4 & 1.
Q2) Limited liability means:
A)the liability of shareholders for company debts is normally limited to the amount they have paid for their shares.
B)the liability of directors for company debts is limited.
C)if the company fails, the creditors may have to bear greater losses than if they were dealing with a non-company.
D)Both A and C.
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Chapter 5: Regulatory Framework for Companies
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Sample Questions
Q1) Which of the following statements is incorrect? Under ASX Listing Rules, companies must:
A)attempt to follow best practice recommendations only if it is convenient.
B)identify reasons for not following the recommendations.
C)disclose if a recommendation is not met.
D)disclose if a disclosure is specifically required under a Rule.
Q2) The global set of standards established for financial reporting cover each of the following aspects except:
A)information disclosure.
B)asset valuation.
C)valuation of shares.
D)measurement of profit.
Q3) What are consolidated accounts?
A)another name for ledger accounts.
B)prepared by the parent company for a group of companies.
C)are an amalgamation of a set of accounts for a group of companies as if the group was a single entity.
D)Both B and C.
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Chapter 6: Measuring and Reporting Cash Flows
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Sample Questions
Q1) Which of the following is a warning sign of problems in managing cash flows?
A)proceeds of borrowing that are continually greater than repayments of borrowings.
B)dividends paid to shareholders that are greater than profit.
C)cash flow from operating activities that is significantly lower than profit.
D)all of the above.
Q2) If the opening balance of equity is $45,000, the closing balance is $60,000 and profit is $27,000, calculate the amount of dividends paid (assume all dividends declared have been paid)which will appear as a financing outflow in the statement of cash flows.
A)$15,000.
B)$42,000.
C)$12,000.
D)Nil.
Q3) The income statement tends to obscure cash movements because it is
A)only produced annually.
B)accrual-based.
C)cash-based.
D)not audited.
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8
Chapter 7: Corporate Social Responsibility and Sustainability Accounting
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Sample Questions
Q1) Which of the following is an independent institution whose mission is to develop and disseminate globally applicable Sustainability Reporting Guidelines?
A)The Global Reporting Initiative (GRI).
B)The Group of Eight.
C)The United Nations.
D)The World Bank.
Q2) Which of these is a way in which sustainable reports should be similar to current financial reports?
A)Degree of auditability of reports.
B)Reliance on monetary measures.
C)Scope of report.
D)Comparability.
Q3) An argument against corporate social responsibility is:
A)It is too costly.
B)It is too difficult.
C)Business is about building wealth for its shareholders, not helping society.
D)All of the above.
Q4) Briefly outline the essence of the balance scorecard approach.
Page 9
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Chapter 8: Analysis and Interpretation of Financial Statements
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Sample Questions
Q1) On what does the adequacy of the gross profit margin depend?
A)selling price.
B)buying price.
C)total expenses.
D)Both A and B.
Q2) Why is interest added back to profit before tax when calculating return on total assets?
A)Because interest rates vary over time.
B)To indicate to lenders that some risk is involved.
C)Because the efficient use of resources should be examined independently from the method of financing.
D)Both A and B.
Q3) Dollar Ltd has a current ratio of 2:1. This means that:
A)there is $2 of current assets for every $1 of current liabilities.
B)its current assets are half its current liabilities.
C)its current assets are insufficient to meet its current liabilities.
D)its current assets are equal to its current liabilities.
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Page 10
Chapter 9: Cost-Volume-Profit Analysis and Relevant
Costing
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Sample Questions
Q1) Which of these would be considered a fixed cost?
A)Cost of fuel for a transport company.
B)Laundry costs to wash towels used by a hairdresser.
C)Insurance premium.
D)Materials used in production.
Q2) Sand Art sells ceramic pots. The pots sell for $30 each with variable costs totalling $25 per pot. Fixed costs are $50,000. The number of pots that have to be sold to break even is:
A)10,000 pots.
B)8,000 pots.
C)2,000 pots.
D)7,000 pots.
Q3) If the sales output of a firm increases, what will be the impact on the break-even point?
A)Increase.
B)Reduce.
C)No change.
D)Equal the margin of safety.
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Chapter 10: Full Costing
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Sample Questions
Q1) Under both the traditional approach to full costing and activity-based costing, there is no difference in the:
A)total costs.
B)assignment of overhead costs.
C)unit cost.
D)Both A and B.
Q2) By the end of the 20th Century, the manufacturing sector had fundamentally altered from the sector in the 1920s. The sector is now characterised by the following features, except for:
A)low levels of depreciation.
B)a highly competitive international market.
C)capital-intensive and machine-paced production.
D)a high level of overheads relative to direct costs.
Q3) At the time of the industrial revolution in Britain, the manufacturing sector was characterised by the following features, except for:
A)high use of technology.
B)a relatively uncompetitive market.
C)direct labour-intensive and direct labour-paced production.
D)a low level of overheads relative to direct costs.
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Page 12
Chapter 11: Budgeting
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Sample Questions
Q1) What variance does the difference between the actual cost of the direct labour hours worked and the planned cost of the direct labour hours measure?
A)The direct labour efficiency variance.
B)The direct labour rate variance.
C)The total direct labour variance.
D)None of the above.
Q2) If actual sales are $96,000 and budgeted sales are $87,000 and actual advertising paid is $6,100 and budgeted advertising is $7,300, the variances are respectively are: Note: F - Favourable, U - Unfavourable (adverse).
A)$9,000F; $1,200U.
B)$9,000U; $1,200U.
C)$9,000F; $1,200F.
D)$9,000U; $1,200F.
Q3) What does flexing the budget mean?
A)revising the budget sales figure to match actual sales.
B)ignoring previously set targets.
C)revising the budget to reflect changes in management behaviour.
D)revising the original budget estimates to produce a budget based on the actual volume of activity.
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Page 13
Chapter 12: Capital Investment Decisions
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Sample Questions
Q1) What is the formula for net present value per $1 of investment?
A)Net Present Value/Investment.
B)Net cash flows/ Investment.
C)Present value of inflows/initial investment.
D)Present values of inflows/present value of outflows.
Q2) Which of these is not generally regarded as an advantage of the payback method?
A)It emphasises early cash flows which have greater certainty.
B)It emphasises liquidity.
C)It minimises having to forecast too far into the future.
D)It avoids having to take into account the time value of money.
Q3) It is important to get investment decisions right for which of the following reasons?
A)Large amounts of resources are often involved.
B)They may affect the business for many years.
C)They can be difficult and/or expensive to 'bail-out' of once started.
D)All of the above.
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Chapter 13: The Management of Working Capital
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Sample Questions
Q1) If sales are $950,000, the cost of sales is $600,000 and average inventory is $65,000, the average time taken to sell inventory in days is:
A)39.54 days.
B)23.6 days.
C)11 days.
D)33 days.
Q2) Which of the following is the most useful tool for managing cash?
A)Cash budget.
B)Quick ratio.
C)Current ratio.
D)Aging of debtors.
Q3) Which statement concerning inventory is not true?
A)Regular physical stocktakes are part of the efficient management of inventory.
B)Electronic point of sale systems greatly assist in the management of inventory.
C)All categories of inventory should always be subject to the same degree of control.
D)None of the above, i.e., all are true statements.
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15
Chapter 14: Financing the Business
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Sample Questions
Q1) The most important difference between a bonus share issue and a rights issue, from the issuing company's point of view, is that they:
A)require different accounting practices.
B)benefit different groups.
C)have different effects on cash flow.
D)none of the above.
Q2) An advantage of short-term over long-term borrowing is:
A)lower costs.
B)no need to repay.
C)flexibility.
D)all of the above.
Q3) A firm with low business risk could safely consider finance using:
A)high debt.
B)little debt.
C)no debt.
D)none of the above.
Q4) Discuss the advantages and disadvantages of a company issuing long-term debt, e.g., debentures, compared to raising funds through an issue of shares.
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